The story of America in 2024 is seemingly one of unbounded partisan division. Yet, if we look deeper, there are examples of lawmakers pursuing bipartisan solutions. Strengthening America’s hand in its competition with China is one such area.
For instance, both parties have taken a similar stance on trade. The Trump Administration raised the tariffs on Chinese imports from an average of 3.1 percent in 2017 to 19.3 percent in 2021. The Biden Administration has retained these increases and added significant new tariffs on electric vehicles, semiconductors, and other manufactured goods.
Both parties have evinced a desire to confront China on human rights issues as well. In 2021, Congress passed the Uyghur Forced Labor Prevention Act with broad bipartisan support. The act strengthened U.S. prohibitions on the importation of goods made “wholly or in part” by forced labor and funded a robust enforcement infrastructure.
In August, a bipartisan group of senators unveiled legislation to close what is arguably China’s favorite American loophole – the $800 de minimis exemption.
The legal definition of de minimis is “too small to be meaningful.” Because such imports have been seen as immaterial, they are admitted into the United States duty- and tax-free and with a minimum of documentation. Throughout the 1990s and 2000s, as e-commerce and express shipments grew, the number of importers using this low-value provision steadily increased.
In 2015, Congress increased the de minimis level from $200 to $800, theorizing the government would save resources by allowing it to focus on high-value shippers – not small shipments bound for your doorstep.
The effects of this increase have been profound. The number of de minimis imports entering the United States went from 220 million packages in 2016 to 1 billion packages in 2023 – hardly “too small to be meaningful.”
According to a recent report from the House Select Committee on the Chinese Communist Party, more than 60 percent of all de minimis imports originate in China. The Committee estimates that more than 30 percent of all de minimis packages come from just two companies: Temu and Shein.
Temu was founded in 2022 as the U.S. offshoot of Chinese e-commerce giant PDD Holdings. Shein was founded in China in 2008 and has grown to become one of the world’s largest fast-fashion retailers. Both companies operate as retail platforms that connect American consumers with Chinese producers. Virtually everything they sell to American purchasers is delivered through direct-to-consumer shipments from China.
The Select Committee quotes Temu as saying it is not responsible for monitoring compliance with the Uyghur Forced Labor Prevention Act among their reported 80,000 suppliers because they are not the “importer of record” (i.e. the legally responsible importer) into the United States.
And because neither Temu nor Shein are the “importer of record” and their shipments fall below the $800 de minimis threshold, neither pays customs duties. By contrast, San Francisco-based Gap, Inc. paid $700 million in duties in 2022.
In a recent letter to President Biden, Senators Sherrod Brown (D-Ohio) and Rick Scott (R-Florida) stated that Temu and Shein’s free de minimis ride was a key factor in the surging retail closures. In short, the current de minimis law allows Chinese e-commerce companies to sell whatever they want directly to Americans tariff-free and with no obligation to comply with U.S. laws and standards.
It is no wonder these firms have been so successful. And no wonder so many U.S. small businesses and trade associations are demanding reform.
Sadly, the de minimis problem is not just about leveling the commercial playing field. Drug traffickers and other bad actors have become well-attuned to the advantages of shipping fentanyl and other illicit products to the United States in such packages. Shipments are often loaded in China, enter the U.S. with limited oversight, and go directly to American communities with catastrophic effects.
The August 2024 bipartisan bill makes a credible effort to address the many problems with the de minimis regime.
It bars certain categories of goods, including textiles, apparel, and leather goods – key products for both Temu and Shein – from being imported under the de minimis regime. It increases data requirements for de minimis shipments, making it easier for U.S. Customs to identify illicit shipments. It also applies a $2 user fee, which will require shippers to offer more data and provide Customs with more resources for enforcement. In addition, it empowers Customs to better monitor, seize, and apply trade rules to problematic de minimis shipments.
Congress should immediately pass this important bill.
